Last week, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments on the validity of the regulation issued by the Department of Labor (DOL) last year that expanded small employers’ access to association health plans (AHPs).

Arguing that the AHP rule was an attempt to dismantle the Affordable Care Act, 12 Democratic attorneys general brought the legal challenge of the rule. Meanwhile, amicus briefs were filed in support of the AHP rule by state insurance regulators from Montana and Oklahoma, 16 Republican state attorneys general or governors, and the U.S. Chamber of Commerce, among other business organizations.

In March, a lower federal court agreed with the plaintiffs that the AHP rule was inconsistent with the Employee Retirement Income Security Act (ERISA) and set aside significant provisions relating to working owners and commonality of interest. The DOL rule had loosened the “commonality of interest” requirement for associations while prohibiting associations from conditioning membership on health and certain other factors. It had also allowed working owners to enroll in AHP coverage for the first time.

The DOL argues that AHPs would allow small employers to reduce regulatory and administrative costs and would strengthen their bargaining position to obtain more favorable deals, as well as a wider array of insurance options for their employees.

According to guidance released in April, the DOL and the Department of Health and Human Services will not take enforcement action for violations that occurred before the lower court decision so long as the entity made decisions in good faith reliance on the AHP rule. 

Heather Eilers-Bowser is Big “I” counsel, federal government affairs.